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Derivative Action
UnitedHealth Group Incorporated (UNH)
Chimicles & Tikellis LLP commenced a derivative action (an action filed on behalf of the company benefiting the shareholders) on behalf of UnitedHealth Group Incorporated (“UNH”) in the United States District Court for the District of Minnesota. The action, Simon v. McGuire, et al, No. 06-cv-01958, was brought against the Board of Directors of UNH for breach of fiduciary duty to UNH and its shareholders, gross mismanagement, corporate waste and violations of Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78(a). Dr. William W. McGuire, Chairman of the Board of Directors and CEO of UNH and Stephen J. Hemsley, COO of UNH are also charged with breach of their employment agreements and unjust enrichment.
UnitedHealth Group Incorporated ,a Minnesota corporation, is a HMO /TPA (third party administrator) which describes itself as: providing services and applying technologies that improve access to health and well-being services, simplify the health care experience, and promote quality, making health care more affordable. UNH operates in all 50 states and internationally. Dr. McGuire is one of the highest paid health plan executives in the nation, receiving an annual compensation of $8 Million. Hemsley receives an annual salary of $1 Million plus targeting bonus of 125% of his salary.
The Complaint alleges that UNH’s Board of Directors breached their fiduciary duties and committed corporate waste and gross mismanagement by authorizing or allowing the Company’s top executives, including McGuire and Hemsley, to backdate the receipt of their stock options so that the grants were dated on the day that UNH stock hit a low price or just prior to a sharp increase in the stock price. The Complaint alleges that the practice of backdating stock options unjustly enriched management at the direct expense of UNH and violated the stock option plan (which provide that the exercise price of all of the stock options would be no less than the fair market value of UNH’s common stock at the publicly traded closing price on the date of the grant). Also at issue is the unusually lucrative stock options grants to the members of the Board.
The complaint additionally alleges that on April 8, 2003 and again on April 7, 2006, UNH, with the authority and permission of the Board of Directors, disseminated materially false and misleading proxies. These proxies were used to solicit and obtain shareholder votes approving the re-election of McGuire to the Board for three year terms without disclosing the actual terms of McGuires’s stock options package, specifically the backdating practice.
The Complaint filed by Chimicles & Tikellis LLP can be viewed here.
For further information, you may contact:
Denise Davis Schwartzman (DeniseSchwartzman@chimicles.com)
Kimberly M. Litman (KimberlyLitman@chimicles.com)
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